Manufacturers Were Too Dumb to Listen to Experts About How the "Fiscal Cliff" Was Damaging the Economy

Friday, 18 January 2013 06:01

The Fed reported a sharp jump in manufacturing output in December, demonstrating that factory owners were too dumb to realize that they were supposed to be cutting back production because of worries over the fiscal cliff. Earlier in the week the Commerce Department reported that consumers were also too stupid to realize that they were supposed to be cutting back their purchases over such concerns. Clearly the economy has serious problems when manufacturers and consumers refuse to act in the way that leading economists say they should be acting.

The fiscal cliff deal had $3.9 trillion in tax cuts and deficit spending.

If debt was really a problem, why did the markets rally instead of freaking out?

In a liquidity trap with a trillion dollar hole in demand, the problem is too little spending not too much spending.

+3

...written by kharris,
January 18, 2013 9:48

Would probably be best to avoid silly-ass data analysis if you want to maintain a reputation. Factory output has had two decent months in a row. Part of what happened was replacement of autos destroyed by Sandy. Vehicle and parts output was up 17.2% from a year ago. Ex-vehicle, factory output was up 1.2% from a year ago. Thunderous, huh?

Retail sales rose 0.5% in December, about average for the past year or two. Take out cars (Sandy, again) and the gain was 0.3%, also about average. Both were up a bit more than 2% y/y, not accounting for inflation.

+0

:o)written by watermelonpunch,
January 18, 2013 6:15

I enjoyed this, thanks. :D

+0

...written by JDM,
January 18, 2013 10:59

So kharris, you're saying factories and sales respond to demand instead of deficit worries. Just like Dean is pointing out.